Pepco to D.C.: Hands off management’s compensation

A call to tie Pepco management’s compensation to the reliability of the company’s power system has earned a predictable response from the utility.

Back off.

The D.C.’s Office of the People’s Counsel on Aug. 2 petitioned the D.C. Public Service Commission to establish a mechanism by which the utility’s senior management compensation would be directly tied to the electric distribution system’s reliability in the District.

In its response, filed Aug. 13, Pepco argues that it is “long-established Commission policy and law that the establishment of management compensation is a management prerogative, absent indications of abuse or impropriety.”

Pepco cites a 1994 commission ruling that the “company has the discretion to determine executive salaries using any legal method it choose; and, in each base rate case, the Commission has the authority to disallow unreasonable executive salaries.”

The utility further claimed that compensation issues are best examined in a rate case, and that the Office of the People’s Counsel, which represents ratepayers in cases before the PSC, “provides no credible support for its motion.”

The OPC, long a Pepco nemesis, pulled no punches in its petition, which came about a month after a derecho left hundreds of thousands of homes and businesses without power regionwide for days.

“The one constant throughout this long period of suffering for District ratepayers has been the fact that Pepco’s reliability is not getting better,” the people’s counsel wrote in its filing with the Public Service Commission. “Nor does it appear that Pepco is getting the message that its dreadful reliability is unacceptable.”

Pepco, naturally, refutes any suggestion that it has not improved. But the OPC goes on: “Pepco’s management remains focused on dividends and profits and not on reliability. That has to change.”

With regard to salary and performance, the OPC “believes such a mechanism could be established relatively quickly and that it would produce immediate benefits to District consumers.”

It is unclear when the Public Service Commission will decide whether to take the case. What is clear, however, is that Pepco remains public utility enemy No. 1 in the eyes of public officials in D.C. and Maryland.